Posts Tagged ‘renewable energy certificates’

According to The Australian, there is discussion about the exclusion of solar hot water heaters from the REC (Renewable Energy Certificates) Scheme.

Anyone currently installing a solar hot water system, receives payment (usually as a point of sale discount) for REC’s. The quantity varies depending on the system and location, but price reductions are substantial (between $1,200 and $2,000).

So if the government really goes ahead with this decision, solar hot water will become much more expensive to purchase and take much longer to pay for itself.

No decision until October

However, I just talked to a very friendly and helpful officer from the Office of the Renewable Energy Regulator. He pointed me to the Department of Climate Change, where a short report outlines the review process of the mandatory renewable energy target which is currently happening.

The conclusion: nothing is decided yet (recommendations will not be finalised until October) and the earliest that new regulations come into force is mid 2009.

One of the biggest changes is that the mandatory renewable energy target is supposed to be extended to 2020 and reach 45,000 GWh. That represents 20% of Australia’s energy consumption and would be a good start.

Not quite like the challenge Al Gore put to America: 100% renewable in 10 years, but another step forward.

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Prices for Renewable Energy Certificates are falling again.

It was only 4 days ago that the Renewable Energy Certificate price dropped from $49 to $47. Today, we got notice that the going price is going to be $43.

What that means is that the cost for a standard roof mounted system is $186 more than it was last week.

Good or Bad?

Of course is is bad that the you have to pay more for a solar hot water system. However, compared to what the prices were like in the past, $43 is still a huge rebate ($1,333 for the standard system and $1,935 for the 400 Litre split system). And that is in addition to the $1,000 federal rebate you might be eligible for.

The other good thing is that the price drop shows that there are more REC’s being offered than companies wanting to purchase them. That means we are well on the way to increasing the renewable energy production.

The Decision

Naturally, you want to get the best price for your REC’s. So the question is whether to wait and hope that the price will increase again (with the risk that it might fall further).

Or to purchase now to get what you can before prices for REC’s fall even further.

Unfortunately, I do not know what the future will bring. So I cannot advice on the best course of action. But looking at the volatility of the REC prices in the past, I would not be surprised if they continue to fall. On the other hand, significant rises are unlikely.

And when you look at the lifetime benefit from a solar hot water heater, the significance of the REC payment pales in comparison.

Payment for renewable energy certificates have fluctuated between $10 as recently as 18 months ago and a current high of $49.

Every owner of a solar hot water system can generate a certain number of renewable energy certificates (REC’s) and sell them. We look after all the organisation and paperwork for you, so all you will notice is a reduction of the purchase price.

Why does the renewable energy certificate price fluctuate?

Simply because of the demand. Energy retailers have to purchase a certain number of REC’s to reach the mandatory renewable energy target. Other offsetting companies use them to offset greenhouse gas emissions. As more people are demanding these services, the price goes up.

You benefit, because you are paid the value of the renewable energy certificates that are created for your solar hot water system.

Can the prices fall again?

Yes most definitely. They can and have done so in the past.

Can they rise higher?

In theory yes. It just needs more buyers who are willing purchase at higher prices.

However, the mandatory renewable energy target stipulates a penalty rate of $40 (plus 30% company tax). This means that when prices rise above $52, it becomes cheaper to pay the penalty.

Renewable Energy Certificates (REC) have been set up by the Australian government as a form of currency. One REC can be created for every kWh of renewable energy that is produced.

Energy retailers on the other hand need to surrender enough REC’s each year to contribute their share to the Mandatory Renewable Energy Target.

Even though a solar hot water systems does not produce electricity, it produces energy in the form of hot water. Rather than measuring the actual output, a deemed number of REC’s is associated to each model of solar hot water unit. This varies depending on where you are located in Australia (your quote includes exact details).

Your obligation

It is up to you to create the REC’s. However, we prepare everything for you and actually reduce the price by what you get for the REC’s. That way you do not have to pay it first and then get it back. Instead you only have to check and sign the pre-filled form.

Please note that this is different to the Federal Solar Hot Water Rebate, which we cannot claim on your behalf.

Your choice

You may choose to voluntarily surrender your REC’s. That means that you indirectly help to create more renewable energy. If you do that, you cannot sell the REC’s and need to pay an additional $1,400 to $1,800.